Tonkin v. United States

• Decision Date: 11 September 1944
• Docket Number: Civil Action No. 2765.
• Citation: 56 F. Supp. 817
• Parties: TONKIN et al. v. UNITED STATES.
• Court: U.S. District Court — Western District of Pennsylvania

56 F. Supp. 817

TONKIN et al. v. UNITED STATES.

Civil Action No. 2765.

District Court, W. D. Pennsylvania.

September 11, 1944.

Patterson, Crawford, Arensberg & Dunn, James S. Crawford, Charles F. C. Arensberg, and Ella Graubart, all of Pittsburgh, Pa., for plaintiffs.

Charles F. Uhl, U. S. Atty., of Pittsburgh, Pa., Samuel O. Clark, Jr., Asst. Atty. Gen., and Andrew D. Sharpe and Leland T. Atherton, Sp. Assts. to Atty. Gen., for the United States.

GIBSON, District Judge.

The Court, after hearing and consideration, makes the following Findings of Fact and Conclusions of Law:

Findings of Fact

1. The stipulation of facts, filed with the Court on June 14, 1944, is here adopted, now referred to and made a part hereof.

2. On December 3, 1936, when John B. Tonkin transferred 2,204 shares of the common stock of the Standard Oil Company of New Jersey to the Peoples-Pittsburgh Trust Company as trustee, he was in good health and looking forward to the enjoyment of life after his retirement as President of the Peoples Natural Gas Company. He played golf regularly, he liked travelling, and often expressed confidence that he would outlive his father, who died at ninety-two.

3. One of Tonkin's intimate friends was his family doctor, Dr. MacMurray, who examined him frequently. While Tonkin had had a valvular heart leak from childhood, Dr. MacMurray did not consider it serious and indeed never told Tonkin about it. During MacMurray's association with him Tonkin was never seriously ill except for an attack of appendicitis about twenty-five years ago.

4. John B. Tonkin for more than forty years was connected with the Standard Oil Company of New Jersey and with its subsidiary, the Peoples Natural Gas Company, of which he was President. In 1935 he was eligible for retirement under the pension plan of Peoples Natural Gas Company. But because of the launching of a new enterprise in which he was interested, he postponed retirement until February 1, 1936. He looked forward to a period of leisure following his retirement.

5. After his retirement he maintained an office in the Peoples Gas Building for which he bought new furniture and equipment.

6. He was a Director of the Peoples-Pittsburgh Trust Company and attended the meetings of its Board and Executive Committee faithfully. He was also a Director of the Passavant Hospital and was a member of several business and social organizations.

7. In 1935 to 1936 he built and furnished a large house at Madison, Ohio, at a cost of about $32,000. During the winters he went to Florida and during the summers he stayed at his house in Madison, where he played golf frequently and led an active outdoor life. On his customary trip to Florida in the winter of 1940 he contracted pneumonia and died.

8. Tonkin had acquired during the many years he was connected with the Standard Oil Company of New Jersey and its subsidiary more than 10,000 shares of Standard Oil Company of New Jersey stock. He knew his holdings were too large and felt the need of diversifying his investments. In addition the situation with respect to the expropriation by the Mexican Government of foreign oil properties was another reason why he felt it was necessary to divest himself of some of his Standard Oil Company stock. Standard Oil Company stock was very high in the latter part of 1936.

9. He discussed this need for disposing of some of his holdings in Standard Oil Company stock with Gwilym Price (then Vice President in charge of trusts of the Peoples-Pittsburgh Trust Company) with whom Tonkin had been associated as a Director in the management of the affairs of the Trust Company. He also discussed the desirability of selling a considerable portion of Standard Oil Company stock with Joseph S. Mason, who was an insurance broker, and told his brother, Loring Tonkin, that he, Tonkin, ought to sell some of his Standard and buy something else.

10. As a result of his discussions and in view of his circumstances and experience Tonkin decided to invest in annuities, thus giving him a substantial investment unrelated to his Standard Oil Company stock. The investment in the annuities had the added advantage of reducing his Federal income tax and his state personal property tax in that the payments received on the annuities were partially a return of principal and to that extent not taxable.

11. On December 3, 1936, when Tonkin made the deed of trust and transferred 2,204 shares of Standard Oil Company stock to the trustee, the stock was higher than it had been for many years. If Tonkin had sold the stock himself, he would have had a large capital gains tax to pay, whereas by transferring the stock to a trustee, the taxable gain to the trustee would be very much less, and the trustee in paying income taxes would be in a much lower bracket than Tonkin himself.

12. The letter of December 9, 1936, written by May S. Tonkin to the Peoples-Pittsburgh Trust Company, instructing the trustee to purchase single premium life insurance policies, was her voluntary act. There is no evidence that she was not a free agent in determining whether or not she wished to take this action.

13. The annuities purchased by Tonkin were complete transactions in themselves and did not depend upon any action taken either by his wife or by the trustee. They did afford an opportunity for the purchase of single premium life insurance policies, but whether or not such single premium life insurance policies were purchased did not in any way affect the annuities.

14. The purchase by Tonkin of annuities was not contingent or dependent upon the exercise by his wife of the right given her under the trust agreement to require the trustee to purchase single premium life insurance policies.

15. The purpose of John B. Tonkin in creating the trust of December 3, 1936, was to effect a savings in income tax on capital gains, and to reduce his income and personal property taxes. The total savings for the years 1936 to 1939 were $9,126.04.

16. Contemplation of death was not an impelling motive for the gifts made by Tonkin in 1936.

17. The gifts made by Tonkin in 1936 were not transfers intended to take effect at or after his death.

18. The impelling motive of Tonkin in purchasing annuities was not to enable the trustee named in the deed of trust of December 3, 1936, to purchase single premium life insurance policies on his life, if the trustee was requested to do so by Mrs. Tonkin.

19. The following Certificate of Death was filed in Florida after the death of John B. Tonkin:

                  This is a true Local Registrar's Copy
                       (Signed) Lurana A. Pohzehl  (Seal)
                         Deputy Clerk & Deputy Local Registrar V. S. Dist
                                                               11-09
                                         Certificate of Death
                                                Florida
                  State Board of Health           State File No. xxx
                  Bureau of Vital Statistics      Registrar's No. 46
                  1. Place of Death
                  (a) County Dade      District No. 11-09
                  (b) Precinct xxxxx              Precinct No. xxxxxx
                               (Write name, not number)
                  (c) City or Town Miami Beach  City or Town No. 11-552
                  (d) Name of hospital or institution 3301 Collins Ave
                                  (If not in hospital or institution, write street number or location)
                  (e) Length of stay: In hospital or institution xxxxxx
                  At place of death 2 weeks
                                       (Specify whether years, months or days)
                  2. Usual Residence of Deceased
                  (a) State Penn.    (b) County Allegheny
                  (c) City or Town Pittsburgh
                                     (If outside city or town limits, write Rural)
                  (d) Street No. 5863 Marlboro St
                                    (If rural, give location)
                  (e) Citizen of Foreign country?       xxxxxx
                                                         yes or no
                       if yes, name country xxxxxx
                  3. Full name of Deceased   John Barnett Tonkin
                  3. (a) If veteran             3 (b) Social Security
                           name war  None             No.    None
                

                  4. Sex Male                   5. Color or race white
                     Single, married, widowed or divorced Married
                  6. (a) If married, widowed or divorced, husband of (or)
                           wife of     May Simpson Tonkin
                  6. (b) Age of husband or wife, if alive 63 years
                  7. Birth date of deceased Sept. 20, 1875
                                         (month) (day) (Year)
                  8. Age:     Years     Months     Days      If less than one day
                               63                                 ___ hrs. ___   min.
                  9. Birthplace Tidionti                     Penna.
                              (City, town or county)         (State or foreign country)
                  10. Usual occupation Retired
                  11. Industry or business Executive
                  12. Name —  Father —  John Tonkin
                  13. Birthplace Penna.
                  14. Maiden name — Mother —  Margaret Barnett
                  15. Birthplace St. Louis, Mo.
                  16. Informant's Signature (Signed) Mrs. May Tonkin
                  16 (a). Address  Pittsburgh, Pa.
                  17. Burial, cremation or removal? Removal
                  17 (a). Date   1/27/40      17 (b) Place Pittsburgh, Pa.
                  18. Funeral Director's Signature W. L. Philbrick
                  18 (a). Address Miami, Fla.
                  19. Filed 1/26 1940      Clara P. Bennett
                                          Deputy Local Registrar
                                          Medical Certification.
                  20. Date of Death:   Month  Jan.        Day   26
                         Year  1940   hour  1    Minute    P. M.
                  21. I hereby certify that I attended the deceased from Jan. 14, 1940 To Jan.
                        26, 1940; that I last saw him alive on Jan. 26, 1940; and that death
                        occurred on the date and hour stated above.
                                                                 Duration
                      Immediate cause of death
                        Coronary thrombosis                few minutes
                      Due to Auricular fibrillation    4 yrs.
                      Due to xxxxxx
                      Other conditions xxxxxx
                                      (Include pregnancy within 3 months of death)
                
                

                    Major findings:                                   Underline the cause
                     of operations xxxxxx                             to which death
                                   xxxxxx

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